Chapter 2—Financial Reporting: Its Conceptual Framework multiple choice



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Chapter 2—Financial Reporting: Its Conceptual Framework
MULTIPLE CHOICE
1. Which of the following statements is not true with regard to the benefits derived from the FASB's conceptual framework of accounting?

a.

It serves as a guide in establishing standards for the FASB.

b.

The Statements of Financial Accounting Concepts is the primary source of GAAP for accountants.

c.

It establishes the objectives of financial reporting.

d.

It enhances comparability between different companies' financial statements.

ANS: B PTS: 1 DIF: Easy OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
2. How many Statements of Financial Accounting Concepts have been issued?

a.

6

b.

7

c.

31

d.

over 100

ANS: B PTS: 1 DIF: Easy OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
3. The first part of the conceptual framework project had to do with

a.

elements

b.

objectives

c.

qualitative characteristics

d.

recognition and measurement

ANS: B PTS: 1 DIF: Easy OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
4. The accounting projects portion of the FASB's conceptual framework project deals with

a.

which accounting elements should be reported and how they should be measured

b.

which accounting elements should be reported and where the information should be reported

c.

how the accounting elements should be measured and how information should be displayed in financial reports

d.

when accounting elements should be recognized and how information should be displayed in financial reports

ANS: A PTS: 1 DIF: Moderate OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

5. The FASB divided its conceptual framework activities into several projects. Which of the following was not one of those projects?



a.

objectives project

b.

qualitative characteristics project

c.

financial reporting project

d.

accounting project

ANS: C PTS: 1 DIF: Easy OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
6. The accounting projects portion of the FASB's conceptual framework project deals with all of the following except

a.

how elements should be measured

b.

when various elements should be reported

c.

which accounting elements should be reported

d.

how financial reports should be displayed

ANS: D PTS: 1 DIF: Easy OBJ: 2.1

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
7. The FASB has determined that the primary focus of financial reporting about an entity's performance is information on

a.

resources and obligations

b.

management's stewardship of resources

c.

comprehensive income and its components

d.

cash flows and financial flexibility

ANS: C PTS: 1 DIF: Moderate OBJ: 2.2

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
8. The FASB concluded that the most general objective of financial reporting is to

a.

provide information useful in the decisions made by external users

b.

meet the needs of internal users

c.

provide information about an entity's earnings

d.

provide information about an entity's cash flows

ANS: A PTS: 1 DIF: Moderate OBJ: 2.2

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
9. According to GAAP, which is not a specific objective?

a.

to provide information about an enterprise's cash flows

b.

to provide information that is useful to present to potential investors, creditors, and other users in making rational investment, credit, and similar decisions

c.

to provide information about an enterprise's comprehensive income and its components

d.

to provide information about an enterprise's economic resources, obligations, and owners' equity

ANS: B PTS: 1 DIF: Moderate OBJ: 2.3

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

10. Information about comprehensive income is useful to external users for all of the following purposes except



a.

evaluating management's performance

b.

examining cash flows for the current period

c.

predicting future income

d.

assessing the risk of lending to the company

ANS: B PTS: 1 DIF: Moderate OBJ: 2.3

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
11. In its "Objectives of Financial Reporting by Business Enterprises" the FASB identified a variety of primary users including all of the following except

a.

internal management

b.

investors

c.

creditors

d.

security analysts

ANS: A PTS: 1 DIF: Easy OBJ: 2.3

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
12. GAAP emphasizes the importance of full disclosure by management including all of the following enhancements except

a.

explanations to enhance understanding of major transactions

b.

interpretations of the effects of dividing continuous operations into accounting periods

c.

outlines of internal control procedures in use

d.

explanations of underlying assumptions and methods used

ANS: C PTS: 1 DIF: Moderate OBJ: 2.3

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
13. Which of the following is a specific objective of financial reporting?

a.

provide information that is useful to investors in making investment decisions

b.

provide information useful in assessing the amounts, timing, and uncertainty of prospective cash receipts

c.

provide information useful in assessing the amounts, timing, and uncertainty of prospective cash inflows

d.

provide information about a company's economic resources, obligations, and owners' equity

ANS: D PTS: 1 DIF: Moderate OBJ: 2.4

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
14. A primary focus of financial reporting about a company's performance during an accounting period is information related to the company's

a.

balance sheet

b.

income statement

c.

comprehensive income

d.

cash flows

ANS: C PTS: 1 DIF: Easy OBJ: 2.4

NAT: AICPA FN-Reporting | AACSB Reflective Thinking

15. Accrual accounting relates the financial effects of a company's transactions



a.

so that the costs of nonoperating events are matched to the balance sheet in the period impacted

b.

to the period in which they occur rather than to when the cash receipts or payment occurs

c.

so that the revenue impact of every transaction in a period is properly reflected in the income statement

d.

so that the impact of every transaction is reflected in the statement of cash flows

ANS: B PTS: 1 DIF: Moderate OBJ: 2.4

NAT: AICPA FN-Decision Modeling | AACSB Analytic
16. Which of the following statements regarding financial flexibility is true?

a.

It is the ability of a company to provide a return on investment.

b.

It is the ability of a company to take effective actions to insure the return of capital to the company.

c.

It is the ability of a company to take effective actions to change the amounts and timing of cash flows.

d.

It is the ability of a company to maintain a given level of operations.

ANS: C PTS: 1 DIF: Moderate OBJ: 2.5

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
17. Which of the following types of information was specifically identified by the FASB as being useful in assessing the amounts, timing, and uncertainty of a company's future cash flows?

a.

liquidity

b.

return of investment

c.

financial capability

d.

credit standing

ANS: A PTS: 1 DIF: Easy OBJ: 2.5

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
18. When investors and creditors make investment and credit decisions, they need information to assist them in assessing future cash receipts. Their focus is on assessing the potential of generating

a.

a return of investment of capital

b.

a return on investment of capital

c.

both a return of and a return on investment of capital

d.

neither a return of nor a return on investment of capital

ANS: C PTS: 1 DIF: Easy OBJ: 2.5

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
19. Which qualitative characteristic is an ingredient of relevance?

a.

verifiability

b.

timeliness

c.

neutrality

d.

representational faithfulness

ANS: B PTS: 1 DIF: Easy OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

20. According to the FASB hierarchy of qualitative characteristics, the two primary qualities making accounting information useful are



a.

understandability and decision usefulness

b.

relevance and reliability

c.

verifiability and neutrality

d.

predictive value and feedback value

ANS: B PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
21. Which qualitative characteristic is an ingredient of reliability?

a.

predictive value

b.

feedback value

c.

timeliness

d.

neutrality

ANS: D PTS: 1 DIF: Easy OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
22. According to GAAP, verifiability is an ingredient of

a.

comparability

b.

reliability

c.

representational faithfulness

d.

relevance

ANS: B PTS: 1 DIF: Easy OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
23. In order to be relevant, accounting information should have

a.

timeliness

b.

verifiability

c.

neutrality

d.

representational faithfulness

ANS: A PTS: 1 DIF: Easy OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
24. Which of the following qualitative characteristics may have to be sacrificed in order to achieve timeliness?

a.

relevance

b.

reliability

c.

comparability

d.

predictive value

ANS: B PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

25. Representational faithfulness is a relationship between the reported accounting measurements or descriptions and the economic resources, obligations, and the transactions and events causing changes in these items. This is important because the



a.

bias associated with financial measurements can be reduced

b.

validity of accounting data is an important economic resource

c.

accounting information is relevant for all decisions

d.

financial information is faithfully reported in the accounting records

ANS: A PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
26. Which of the following are considered secondary characteristics of accounting information?

a.

verifiability and feedback value

b.

predictive value and timeliness

c.

comparability and consistency

d.

representational faithfulness and neutrality

ANS: C PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
27. Two constraints mentioned by GAAP on qualitative characteristics are

a.

understandability and decision usefulness

b.

comparability and consistency

c.

relevance and reliability

d.

benefits greater than costs and materiality

ANS: D PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
28. Which of the following items would most likely be a violation of the materiality constraint?

a.

A company did not separately report an unusual gain of $50,000. Its income from operations was $5,000,000.

b.

A company having reported total assets of $20,000,000 immediately expensed the purchase of 20 pencil sharpeners that have an estimated useful life of three years.

c.

A $25,000 illegal bribe by an executive of the company to a foreign official was not separately disclosed in the annual report.

d.

A $5,000 expenditure to improve a building that originally cost $5,000,000 was immediately expensed.

ANS: C PTS: 1 DIF: Difficult OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Analytic
29. Intracompany comparability would be violated if

a.

a company used LIFO as its inventory cost method while other companies in the same industry used FIFO

b.

a company changed its bad debts expense estimate from one percent to two percent

c.

a bank did not classify its assets as current assets and noncurrent assets

d.

a company expenses all expenditures of less than $500 even if the expenditures result in probable future economic benefit

ANS: B PTS: 1 DIF: Difficult OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Analytic
30. In the FASB hierarchy of qualitative characteristics, understandability is a characteristic that is

a.

a secondary and interactive quality

b.

a threshold for recognition

c.

an overall quality

d.

a user-specific quality

ANS: D PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
31. The materiality of an item of financial information refers to the likelihood that its omission or misstatement would affect the judgments of those relying on that information. This concept most closely relates to the

a.

financial magnitude of the item

b.

verifiability of the item

c.

neutrality of the item

d.

feedback value of the item

ANS: A PTS: 1 DIF: Moderate OBJ: 2.6

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
32. Which is not one of the four recognition criteria identified by the FASB?

a.

reliable

b.

understandable

c.

meets the definition of an element

d.

measurable

ANS: B PTS: 1 DIF: Easy OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
33. All of the following items are classified as accounting assumptions and conventions except for

a.

going concern

b.

timeliness

c.

monetary unit

d.

entity

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
34. The city of Fairbanks sold land for its appraised value to the Big Oil Company on June 1, 2010, that originally cost the city $1,000,000. On June 1, 2010, the land was appraised at a value of $1,250,000, and on December 31, 2010, the land's value was estimated to be $1,400,000. On Big Oil Company's balance sheet at December 31, 2010, the land should be valued at

a.

$1,400,000

b.

$1,250,000

c.

$1,000,000

d.

$ 0

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Reporting | AACSB Analytic

35. According to the recognition criteria established for revenue, revenue is normally recognized



a.

during production

b.

at the completion of production

c.

at the point of sale

d.

when the cash is received from the customer

ANS: C PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Analytic
36. For fixed-price construction contracts that require more than one accounting period to complete and for which the costs can be reasonably estimated, revenue should be recognized

a.

during production

b.

at the completion of production

c.

when title to the project is transferred to the buyer

d.

when the cash is received from the buyer

ANS: A PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
37. If collectibility of the revenue is highly uncertain, an appropriate method that should be used to recognize revenue would be

a.

the percentage-of-completion method

b.

at the point of sale

c.

the proportional performance method

d.

the installment method

ANS: D PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Analytic
38. Using the straight-line method to amortize patents is an application of expense recognition using

a.

association of cause and effect

b.

a systematic and rational allocation method

c.

immediate recognition

d.

the percentage-of-completion method

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
39. Using an allowance method of accounting to recognize uncollectible accounts receivable is an application of which accounting convention?

a.

revenue recognition

b.

historical cost

c.

matching principle

d.

period of time

ANS: C PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

40. The state legislature is currently debating a bill that, if passed, would require the Sandiken Company to go out of business. Which of the following principles or assumptions related to the preparation of Sandiken's financial statements is most directly affected by this impending vote of the legislature?



a.

going concern

b.

verifiability principle

c.

entity concept

d.

materiality concept

ANS: A PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
41. Under current GAAP, most resources of a business entity are to be valued in its financial statements at

a.

a value that is most relevant to the needs of users of the financial statements

b.

historical cost

c.

the current cost of replacing the resource

d.

current appraisal values

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
42. Revenue may be recognized by an entity at the completion of production during an accounting period

a.

only if full payment was received from the buyer before production began

b.

when no specific point of sale can be identified

c.

when there is a fixed selling price, and there are no limitations on the amount that can be sold

d.

when collectibility is highly uncertain

ANS: C PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
43. FASB suggests that revenues are considered to be earned

a.

at a date subsequent to the point of sale

b.

throughout the earnings process

c.

when the company is entitled to its benefits

d.

when cash is received

ANS: C PTS: 1 DIF: Easy OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
44. The principle of revenue recognition results in

a.

recording revenue in the income statement

b.

recording realized revenue when it is earned

c.

measuring relevant and reliable information whenever a transaction has occurred

d.

assuring the existence of all amounts recorded as net income

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

45. Solon Corporation has adopted the policy of charging to expense at the time of purchase all assets having a cost of less than $100, regardless of the life expectancy of the asset. This policy is most closely related to the



a.

historical cost principle

b.

period-of-time assumption

c.

verifiability principle

d.

materiality principle

ANS: D PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
46. A company that uses accounting methods in preparing its tax returns that differ from the accounting methods used to prepare its financial statements is

a.

in violation of the consistency principle

b.

not necessarily violating either the income tax laws or generally accepted accounting principles

c.

probably guilty of tax evasion

d.

in violation of the relevance assumption

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
47. Of the following reporting assumptions or reporting principles, the one most widely criticized is the

a.

consistency principle

b.

full-disclosure principle

c.

entity assumption

d.

historical cost principle

ANS: D PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
48. Which one of the following assumptions or principles most logically supports the preparation of a single set of consolidated financial statements that combines the financial information of several wholly owned but separately identifiable businesses?

a.

historical cost

b.

industry practices

c.

entity

d.

materiality

ANS: C PTS: 1 DIF: Difficult OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
49. Expenses are recognized and matched against revenues on the basis of three principles. Which of the following is not one of these principles?

a.

immediate recognition

b.

associating cash flows

c.

systematic and rational allocation

d.

associating cause and effect

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

50. Which of the following sets includes only accounting assumptions and conventions?



a.

timeliness, prudence, historical cost, and neutrality

b.

matching, comparability, period of time, and reliability

c.

monetary unit, going concern, relevance, and materiality

d.

monetary unit, entity, going concern, and realization-recognition

ANS: D PTS: 1 DIF: Difficult OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
51. The use of the historical cost principle is justified because the resulting information has the primary quality ingredients of

a.

neutrality and predictive value

b.

representational faithfulness and neutrality

c.

timeliness and neutrality

d.

verifiability and feedback value

ANS: B PTS: 1 DIF: Moderate OBJ: 2.7

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
52. Which of the following transactions would be reported in the cash flows from investing activities section in the statement of cash flows for the Haleem Company?

a.

Haleem sold a piece of land for $500,000.

b.

Haleem borrowed $2,000,000.

c.

Haleem issued common stock for $800,000 to investors.

d.

Haleem paid a cash dividend to its stockholders.

ANS: A PTS: 1 DIF: Moderate OBJ: 2.8

NAT: AICPA FN-Reporting | AACSB Reflective Thinking
53. Distributions that are paid to owners would affect both the

a.

balance sheet and statement of cash flows

b.

balance sheet and income statement

c.

income statement and statement of changes in equity

d.

income statement and statement of cash flows

ANS: A PTS: 1 DIF: Moderate OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
54. The financial statement that would be most useful in evaluating a company's financial flexibility is the

a.

balance sheet

b.

income statement

c.

statement of owners' equity

d.

statement of retained earnings

ANS: A PTS: 1 DIF: Easy OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

55. The framework for the model of business reporting includes all of the following except



a.

financial and nonfinancial data

b.

independent analysis of the financial data

c.

forward-looking information

d.

information about management and shareholders

ANS: B PTS: 1 DIF: Easy OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
56. The AICPA's Special Committee on Financial Reporting issued a report on a model for business reporting that addresses concerns about

a.

the reliability and flexibility of financial reports

b.

the relevance and timeliness of financial reports

c.

the verifiability and neutrality of financial reports

d.

the relevance and usefulness of financial reports

ANS: D PTS: 1 DIF: Easy OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
57. The model for business reporting is designed to fit the decision processes of users to

a.

make projections

b.

value companies

c.

assess the likelihood of loan repayments

d.

do all of these

ANS: D PTS: 1 DIF: Moderate OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
58. The AICPA's Special Committee on Financial Reporting issued a report on a model for business reporting. The "Financial Reporting" sources of information used in external decision making outlined in the model included all of the following except

a.

parenthetical and footnote disclosures

b.

financial statements

c.

macroeconomic statistics

d.

management discussion and analysis

ANS: C PTS: 1 DIF: Easy OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
59. The CFA's Comprehensive Business Reporting Model argues that certain key weaknesses in the current financial reporting model exist. The weaknesses include all of the following except

a.

current financial statements are not presented in a structure that is useful to investors

b.

current financial statements do not present sufficient information to enable investors to make effective decisions.

c.

current financial statements contain inaccurate measurements

d.

investors must resort to estimates and best guesses to generate the information they need

ANS: C PTS: 1 DIF: Moderate OBJ: 2.8

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

60. The goal of the boards of the IASB and FASB is to develop a joint conceptual framework project that is both complete and internally consistent. However, as a limitation the boards concluded that



a.

a comprehensive reconsideration of all concepts underlying financial reporting would slow the progress but would be a necessary use of their time

b.

the project would have to be split into four phases and worked on one at a time

c.

the project would have to be split into eight phases, and all phases would be worked on simultaneously

d.

a comprehensive reconsideration of all concepts underlying financial reporting would not be an efficient use of their time

ANS: D PTS: 1 DIF: Moderate OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
61. The IASB and FASB boards have agreed that the objective of general purpose financial reporting is to provide

a.

financial information about a company that is useful to external users in making decisions in their capacity as capital providers

b.

mainly cash flow information about a company that is useful to external users in making decisions in their capacity as capital providers

c.

financial information about a company that is useful to internal users in making decisions in their capacity as capital custodians

d.

financial information about a company that is useful to government regulators in making decisions in their capacity as capital markets monitors

ANS: A PTS: 1 DIF: Easy OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
62. The IASB and FASB joint boards feel that financial reporting should

a.

be general purpose

b.

be useful in assessing a company's future cash flows

c.

provide information on an accrual basis

d.

all of these are true

ANS: D PTS: 1 DIF: Easy OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
63. The IASB and FASB joint boards have identified the primary user groups of financial information as all of the following except

a.

equity investors

b.

labor groups

c.

lenders

d.

other creditors (capital providers)

ANS: B PTS: 1 DIF: Easy OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking

64. One of the differences between the IASB/FASB joint conceptual framework and the FASB conceptual framework is that while the FASB identifies relevance and reliability as the primary decision-specific qualities, the tentative joint framework identifies the fundamental qualitative characteristics to be



a.

relevance and completeness

b.

reliability and completeness

c.

relevance and faithful representation

d.

reliability and faithful representation

ANS: C PTS: 1 DIF: Easy OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
65. The joint IASB and FASB boards identified several "enhancing" characteristic of financial information including

a.

comparability, verifiability, timeliness, and understandability

b.

materiality, verifiability, timeliness, and understandability

c.

comparability, verifiability, timeliness, and materiality

d.

comparability, relevance, timeliness, and understandability

ANS: A PTS: 1 DIF: Moderate OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
66. Similar to the constraints in the FASB's qualitative characteristics, the joint IASB/FASB boards have identified two constraints including

a.

benefits that justify the costs and consistency

b.

benefits that justify the costs and materiality

c.

consistency and materiality

d.

objectivity and materiality

ANS: B PTS: 1 DIF: Easy OBJ: 2.IFRS

NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking
67. The joint IASB/FASB qualitative characteristics Exposure Draft identifies a logical order in which to evaluate the qualities. That order (first, second, third) is

a.

faithful representation, relevance, enhancing characteristics

b.

relevance, enhancing characteristics, faithful representation

c.

relevance, faithful representation, enhancing characteristics

d.

enhancing characteristics, relevance, faithful representation

ANS: C PTS: 1 DIF: Easy OBJ: 2.IFRS



NAT: AICPA FN-Decision Modeling | AACSB Reflective Thinking



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